Legal Q&A: Return of the Polkey Principle

On 6 April the new Acas Code of Practice on Disciplinary and Grievance Procedures was implemented, repealing the legislation that introduced the statutory disciplinary and dismissal procedures in 2004. This change will revive the controversial Polkey principle.

Q What is the Polkey principle?

A The term Polkey refers to the case of Polkey v AE Dayton Services Ltd 1988. The claimant (Polkey) was employed as a van driver, and the employer decided to reorganise its business by replacing its four van drivers with three van salesmen. It considered that the claimant would not be suitable for employment as a van salesman, and so made him redundant. There was no consultation and he was summarily dismissed.

A claim for unfair dismissal was submitted on the grounds that the employer, by failing to consult, had not acted reasonably in dismissing him. The employer resisted the claim on the basis that consultation would have made no difference and that he would have been dismissed anyway.

The case reached the House of Lords, which held that procedural fairness was an integral part of the statutory test for assessing the reasonableness of the dismissal. The decision put an end to what had become known as the ‘no difference’ rule. Prior to the Polkey judgement, where there was a procedural irregularity in an otherwise fair dismissal – eg, failure to consult before a redundancy – but it could be shown that carrying out the proper procedure would have made no difference to the final decision, the employment tribunal would be able to find the dismissal fair. The House of Lords overturned this rule in all cases, except those where it would be “utterly useless” or “futile” to carry out the omitted procedure.

Q What does the Polkey principle mean for employers?

A According to the Polkey principle, the procedure the employer follows is relevant to the issue of fairness. However, in relation to the compensation that can be awarded, the employment tribunal is under a statutory obligation to award such compensation as would be just and equitable in the circumstances. Therefore the tribunal could and should reduce the level of compensation – a so-called Polkey deduction – if the employer can show that the end result would have been the same, even if they had followed a fair procedure.

This principle applies in the vast majority of cases as highlighted by the Court of Appeal in Scope v Thornett (2007) when it was pointed out that tribunals will often have to speculate when deciding whether a Polkey deduction should be made. They should only decline to do so where circumstances are such “that one cannot sensibly reconstruct the world as it might have been”.

Q How much can be deducted from the award of compensation?

A The tribunal should express the likelihood that dismissal would have occurred in any event in terms of a percentage chance. The compensation will then be reduced by that percentage. Where dismissal was inevitable, the tribunal will reduce the award by 100%.

Q Did the Polkey principle operate under the statutory dispute resolution procedures?

A The Employment Act 2002, under which the statutory procedures were introduced in 2004, had brought in a partial reversal of the Polkey decision. In assessing reasonableness, the Employment Rights Act was amended so that a failure by the employer to follow a fair procedure, other than the statutory dismissal procedure, would not be regarded by itself as making the dismissal unfair if the employer could show, on the balance of probabilities, that it would have decided to dismiss the employee if that additional procedure had been followed. If the employer could overcome this hurdle – and there was no issue of substantive unfairness – the dismissal would be deemed fair, notwithstanding the procedural failures committed by the employer. Thus, the ‘no difference’ rule was reinstated, although only in circumstances where the minimum obligations of the statutory procedures had been observed.

Q Does Polkey apply to unfair dismissal cases only?

A The House of Lords judgement concerned an unfair dismissal claim and the principle has generally been restricted to unfair dismissal cases ever since. However, in the recent case of Chagger v Abbey National PLC & Hopkins (2009), the employment appeal tribunal held that although the principle established as such does not apply in discrimination cases, an equivalent principle does apply. The result is that if selection of a person for redundancy is tainted by unlawful discrimination, then in assessing the compensation to be awarded to that person, a tribunal must make a percentage estimate of the likelihood that he or she would have been selected for redundancy anyway.